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Abstract
Financial engineering such as trading decision is an emerging
research area and also has great commercial potentials. A
successful stock buying/ selling generally occurs near price
trend turning points. Technical analysis can be used to predict
turning points of the stock. This paper presents intelligent
trading setup which can be used by any investor to pick stock
for buying at right time to get handsome profits.
Keywords
Technical Indicator, Stock ethics, Trendline, Moving Averages,
Volume, Stock price Forecasting
I. Introduction
Trading in stock market is very complex and confusing task.
Investors use different strategies to succeed like buying stocks
at a certain point of time & simply hold them over a period
of time, buying hot stocks, investing in blue chip stocks etc.
Sometimes they follow the crowd by buying popular stocks
that are recommended by friends and financial media. This
approach of selecting stock is not mostly profitable. One needs
a flexible approach to understand what drives up or down the
stock prices. If an investor can understand these forces, he/
she can increase his/her chances of taking right actions like
selling or buying the stock at the right time with a greater
degree of confidence [2,3].
II. Concept of Technical Analysis
Technical analysis is the forecasting of future financial price
moment based on an examination of past price moments.
Technical analysis helps the investor to anticipate the future
price of stock. Technical analysis uses the chart that show
price over time.
For intelligent stock buying, the focus should be on bullish
situations. The first step is to identify the overall trend. This can
be attained by using trend lines, moving averages or technical
indicators. As long as the price remains above its uptrend line,
selected moving average and is accordance with technical
indicators, the trend is considered bullish [1].
A. Price Charts
A price chart is a sequence of prices plotted over a specific
time frame. The high, low & closing price are required to form
the price plot for each period of chart. The high & low are
represented by the top & bottom of the vertical bar and the
close is the short horizontal line crossing the vertical bar. On
daily chart, each bar represents the high, low and close for a
particular day (see Fig. 1) [4].
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If the RSI rises above 30, it is considered bullish for the stock
while if it falls below 70, it is considered bearish signal. Buy/
sell signals can also be generated by looking for positive and
negative divergences between RSI and the underlying stock
(see Fig. 7) [4].
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